Bharti Airtel hits seven-month low in a strong market; down 20% in 1 month

Analyst at Dolat Capital believe the decline is on account of news flow of fund-raise by VIL and Jio postpaid plus plan launch
Shares of Bharti Airtel were under pressure on Monday, hitting a seven-month low of Rs 394 on the BSE, in an otherwise weak market. The stock of the telecom services provider slipped 2 per cent in the intra-day trade and was trading at its lowest level since March 19, 2020.

In the past one month, the stock has slipped 20 per cent, as compared to 3.8 per cent rise in the S&P BSE Sensex. Notably, Bharti Airtel's share price has declined sharply, by around 30 per cent, since the Adjusted Gross Revenue (AGR) verdict on September 1, 2020.

Analyst at Dolat Capital believe this is on account of news flow of fund-raise by VIL, Jio postpaid plus plan launch, and most importantly lack of good news on tariff increase. This is in contrast to expectations of immediate announcement of price hike post the AGR case closure.

"Our calculation implies that from an average revenue per user (ARPU) growth, market is now implying a de-growth. However, we still maintain that 15-20 per cent ARPU CAGR is likely and essential for survival of industry," the brokerage firm said in stock update.

Contrary to stock reaction, business trajectory of Bharti Airtel remains healthy and positive especially in 4G smartphone subscriber additions viz. at par / ahead of Jio. MNP (mobile number portability) request from postpaid subscribers for transition to Jio postpaid is limited. "We appreciate Bharti's in-market execution and the clarity on thoughts and strategy to drive the market share and growth. A few months' delay in tariff increase doesn't alter the strong long-term industry potentials and consecutive positive bias of ours," it said in its report and reiterated 'BUY' on Bharti with target price of Rs 605 per share.

"Bharti Airtel's stock price has corrected due to investor concerns on mobile tariff hike delay. We continue to maintain that the current pricing is not sustainable and therefore expect price hike in the medium to long term. We expect Bharti Airtel to benefit in the medium to long term, given its strong execution and premium position in the sector. We maintain our positive stance on Bharti Airtel with an OUTPERFORM rating and a target price of Rs700," said a recent report by Credit Suisse.

Meanwhile, the board of directors of Bharti Airtel will meet on October 27, 2020 to consider the audited financial results for the second quarter ended September 30, 2020 (Q2FY21).

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